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Wait no more, take the plunge in Dubai property market

It’s time to bid adieu to 2015 and welcome 2016. For all of you complaining about rising rents, there is a golden opportunity to capitalise on attractive property valuations in select Dubai locations and turn a home owner.

This year has primarily favoured property buyers, both in the secondary and offplan markets where vendors and developers have offered reduced prices, attractive payment plans and new stock with improved specification and levels of finish to attract purchasers.

“Dubai has been a buyer’s market for over a year now, with prices moving lower and developers offering not only discounts but also an increasingly imaginative array of payment plans in order to stimulate purchases. We believe that this trend will continue for the foreseeable future, until renewed spending catalysts and an expansionary fiscal policy take hold in the economy,” said Hussain Alladin, head of research, GCP Properties.

“Buyers have a lot to choose from in the current market. Uncertain economic conditions and a high number of offplan projects at competitive rates have also swung the market in favour of buyers,” said Declan McNaughton, managing director, Chestertons UAE.

However, several prospective investors are still waiting on the sidelines, hoping prices will fall further in 2016. Meet S. Kumar, the chairman of a leading supermarket chain in the UAE. “I am keen to buy a home in Dubai for my family. But I believe there is room for prices to decline further in 2016.”

Plateau

A few market experts believe residential prices in Dubai have stopped falling over the last few months, indicating a possible plateau since the correction began in March 2014.

“The second half of 2015 revealed a slackening in the rate of price decline, with some evidence of improved appetite among buyers, especially tenants hoping to move into home ownership – with the incentive of monthly mortgage payments for less than their existing rent,” said Declan King, director and group head of real estate at ValuStrat consultancy.

“While we anticipate some areas will continue to experience price declines well into 2016, subject particularly to the delivery of high volumes of new stock, we feel the next 12 months may represent a window of price stabilisation,” added King.

What’s more, prices have declined by approximately 30 per cent from their peak levels. According to Reidin indices, property prices have fallen by 12 per cent and rents have dipped by a marginal two per cent in 2015.

“However, a granular analysis of transactional data suggests that the price drop is more in the range of 20 to 25 per cent,” said Alladin.

Therefore, from a valuation perspective, prices appear to be attractive at current levels.

Oversupply exaggerated

The market has also seen that oversupply fears are exaggerated. While most analysts predicted that 20,000 to 25,000 units will come to the market in 2015, only 9,000 units have been delivered in the first three quarters.

“We expect a similar completion rate for 2016, given the fact that a robust and expansionary fiscal policy will continue to lead to job creation. If completion rates continue at this pace, demand will continue to outstrip supply, causing prices to move higher, especially in the run-up to Expo 2020,” warned Alladin.

Meanwhile, opinion is divided on the gap between listed and transacted prices of properties in Dubai. However, negotiation can help you identify a good deal.

“Listed prices are negotiable under current market conditions. The extent of negotiation depends on the type of property and the seller’s capacity to hold. There are a few good distress sales that cash buyers can take advantage of,” said Chesterton’s McNaughton.

With sellers motivated to liquidate property before prices fall further, they are capitulating to buyer demands. “There has been a 30 per cent increase in the gap of listed and transacted prices between 2014 and 2015. You have started to see larger discounts available at the top end of the property spectrum compared to the affordable housing segment,” said Alladin.

“On average, deals are being agreed at four to six per cent below listing price, depending on the property itself and the location. Anecdotal research with residential brokers suggests that only a small proportion of their sales are lower than typical market value,” added ValuStrat’s King.

To conclude, investors should procrastinate no more. Act now and lock in a good bargain. With the property sector’s performance in 2016 hinging on liquidity, oil prices and dollar exchange rates, it is wiser to take the plunge now.